Reports have indicated that the Sackler family would provide $3 billion over seven years, and that another $7 billion to $9 billion could come from future sales of OxyContin. (Photo: George Frey/Bloomberg)

Purdue Pharma's proposed settlement on Wednesday could provide some assurances about compensation for cities and counties with pending lawsuits, in the likely event that the opioid manufacturer files for bankruptcy, experts say. But several state attorneys general still balked at the deal as inadequate.

The settlement's details remain unclear, but some reports have indicated that the Sackler family, who founded Purdue, would provide $3 billion over seven years, and that another $7 billion to $9 billion could come from future sales of OxyContin, its prescription opiate, as well as drugs designed to treat opioid addiction. The deal reportedly resolves the claims of about 2,500 cities and counties, plus half the states.

"We believe that this settlement would bring desperately needed recovery resources into local communities that, for years, have been forced to shoulder the devastating consequences and financial burden of the opioid epidemic," said lead counsel for the plaintiffs' executive committee in the multidistrict litigation, which negotiated the deal. "We look forward to sharing more details about the resolution's structure and terms in the near term."

Several state attorneys general, however, immediately slammed the settlement on Wednesday, saying Purdue was "morally bankrupt" and the Sacklers had "blood on their hands."

The deal, however, might be the best bet for 2,500 governments hoping to get reimbursed for the costs of the opioid crisis on their communities, particularly if Purdue files for bankruptcy, said Lindsey Simon, a professor at the University of Georgia School of Law. It ends the "game of chicken" between plaintiffs and Purdue, whose assets are limited.

Cities and counties are hedging that they would get more compensation now than if their cases end up in the bankruptcy court, which is expensive and comes with added legal costs.

"This is why the municipalities are agreeing," she said. "They know reaching a deal with the Sacklers, even if it's not what they want, is more valuable than what they'd get in the bankruptcy case."

For Purdue and the Sacklers, a settlement reached before bankruptcy would ensure that most of the lawsuits against them were resolved.

"It would be a prenegotiated bankruptcy, where some major players settled, and they're fine with the numbers assumed under the settlement, but other major players aren't coming to the table and want something different," said Steven Todd Brown, a professor at the University of Buffalo School of Law. "When you file the bankruptcy, you narrow the group of parties you're having to litigate and try to bring to the table in some way."

On Wednesday, some states, such as North Carolina and Pennsylvania, immediately made plans to add the Sacklers as defendants in their lawsuits against Purdue. But there is a strong likelihood that the Sackler family, as "a significant contributor" to whatever funds are available in a Purdue bankruptcy, could ask for an injunction halting the state actions against them, Brown said.

"The Sacklers aren't filing bankruptcy," he said. "There is not going to be an automatic stay that applies to them. However, they may try to get a temporary injunction of actions against them, which sometimes happens in bankruptcy to prevent others from suing them pending resolution of the case."

In a statement, members of the Mortimer Sackler and Raymond Sackler families said, "The family supports working toward a global resolution that directs resources to the patients, families and communities across the country who are suffering and need assistance. This is the most effective way to address the urgency of the current public health crisis, and to fund real solutions, not endless litigation."

Still, many states, such as New Jersey, Connecticut, New York and Pennsylvania, objected to the deal.

Pennsylvania Attorney General Josh Shapiro called it a "slap in the face."

"It allows the Sackler family to walk away billionaires and admit no wrongdoing," he said in a statement. On Twitter, he called the Sacklers "sanctimonious billionaires" with "blood on their hands."

New York Attorney General Letitia James said the Sacklers are attempting to "evade responsibility and lowball the millions of victims of the opioid crisis."

"A deal that doesn't account for the depth of pain and destruction caused by Purdue and the Sacklers is an insult, plain and simple," she said in a statement. "As attorney general, I will continue to seek justice for victims and fight to hold bad actors accountable, no matter how powerful they may be."

On Twitter, New Jersey Attorney General Gurbir Grewal called Purdue Pharma "morally bankrupt."

"If the company enters financial bankruptcy as well, New Jersey will continue to pursue all available legal options against those responsible," he wrote. "And if Purdue cannot pay for the harm it inflicted, the Sacklers will."

Purdue, in its statement, appeared to acknowledge that not everyone was on board. "Purdue Pharma continues to work with all plaintiffs on reaching a comprehensive resolution to its opioid litigation that will deliver billions of dollars and vital opioid overdose rescue medicines to communities across the country impacted by the opioid crisis."

There are many uncertainties about the settlement. Simon called the estimated valuation "pretty deceptive."

"The company will still have to pay for the drugs to get manufactured," the UGA professor said. "It's going to cost a lot of the estate money. They'll have to pay to make those drugs to give them away."

There also is no guarantee about Purdue's actual value, or how much it would make from the sale of certain businesses, or of its products, she said.

Separately, many of the same states have opposed the idea of a "negotiation" class that the plaintiffs' executive committee has proposed as part of the multidistrict litigation in order to get nearly 34,000 cities and counties involved in a global settlement. On Wednesday, U.S. District Judge Dan Polster, who is overseeing that litigation, granted certification of the class.

A Purdue settlement would have little impact on the first bellwether trial, which Polster is overseeing on Oct. 21 in Cleveland federal court. Purdue was one of several defendants in that trial, but other defendants have reached settlements with the two Ohio counties serving as plaintiffs, and several remain, including Johnson & Johnson and McKesson Corp.

On Wednesday, lead counsel of the plaintiffs' executive committee said, "While this agreement represents significant progress in the litigation, we continue to move forward toward October's federal bellwether trial against other opioid manufacturers, distributors, and pharmacies."

That doesn't mean, however, that the remaining defendants, some of which want to delay the trial, couldn't use the bankruptcy to their advantage, Simon said.

"I could imagine the other defendants making an argument that their cases should be stayed," she said. "It's not an argument that I would be surprised we would see."

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Purdue reaches potential settlement; some states still holding out

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